Last updated: 14:11 / Tuesday, 5 March 2013
ING IM EEMM March Edition

Structural growth decline in China poses a threat for Emerging Market Equities

Imagen
Structural growth decline in China poses a threat for Emerging Market Equities

In ING IM’s last edition of the Emerging Equity Markets Monthly (EEMM) that was published in December the asset manager wrote about the improved environment for emerging equities. Until January, they saw accelerating Chinese growth, better global growth data and easy financial conditions throughout the emerging world producing a nice EM outperformance vis-à-vis developed markets.

But the new positive trend, that emerged after two years of underperformance, has not continued in the new year. Although ING IM still thinks that the current global environment for EM equities is rather good, they have to acknowledge that new risks to the asset class have emerged in recent months. It is the pressure on Asian growth prospects and currencies from the sharp yen depreciation that explains part of the recent headwinds. But the asset manager cannot stress enough that it has also seen increased vulnerability in flows to emerging debt markets because of rising balance-of-payments risks and rising US yields. The recent sell-off in the Turkish equity market can be seen as a warning sign in this respect.

In this EEMM, ING IM assess the key drivers of EM equity markets and explain how it sees EM relative to DM. In the short term, the asset manager does not expect much out or underperformance. The positives and negatives, on their view, seem balanced currently. However, its longer-term take on emerging markets remains cautious, mainly because of the structural growth decline in China and the growing macro imbalances throughout the emerging world.

You can access the full report in the pdf file attached.

 

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